Three 2016 forecasts for the coming year with the dollar and geo-politics

Last night on V's Freedomslips radio show, Wolf, the Guerrilla Economist, and I mentioned some of the forecasts and predictions each of us have for 2016.  For me in particular, I mentioned the significance of Canada, internationalization of the Yuan, and Erdogan's ouster in Turkey, and in this article I will expand upon why I see these three events being highly significant for economies and geo-politics in the coming year. O Canada... my home and native insolvent land

I must admit, up until three weeks ago the only downside I had heard going on in Canada was the housing bubble former central bank head Mark Carney propagated during his time in office there.  But Canada is a Western equivalent of Russia and Australia, and the fall in oil prices over the past nine months have hit our friends to the North in a horrific way.  So much so that not only are people losing jobs, rushing to food banks, and losing their homes in foreclosure, but crime and suicide have soared to nearly unheard of levels.

Canada is expected to lose some 100,000 oil and gas sector jobs by the end of the year. As The Financial Post notes, Alberta’s troubles go beyond falling crude prices. “Apart from the protracted price declines, Alberta’s oil and gas sector has also had to contend with a 20 per cent hike in corporate taxes, a carbon tax and new regulatory policies to limit rein in carbon emissions,” the Post writes, adding that “a new provincial royalty regime is to be announced in January, leaving Alberta oil and gas producers under a cloud of uncertainty [while] the new federal government also plans to unveil new policies, including a review of the regulatory process, which the sector sees as more burden in an already difficult environment for the industry.”

As we pointed out three weeks ago, the real casualties in Canada are no longer metaphorical economic objects, but the very people who until recently enjoyed comfortable lives only to succumb to an unprecedented collapse in the local economy. According to the chief medical examiner’s office, 30% more Albertans took their lives in the first half of this year compared to the same period last year.

And crime are now soaring amid the protracted slide in crude. “Calgary’s unemployment rate rose to 6.9 percent in November from 4.6 percent a year earlier, Statistics Canada data show, as 21,100 more were put out of work,” Bloomberg writes. “Home sales have fallen 21 percent this year as the average price skidded 2.6 percent, according to the Calgary Real Estate Board.” Here’s more:

Brown Bagging for Calgary’s Kids is providing 16 percent more school lunches than in September — about 2,900 across 187 schools. The rise is unprecedented, said Tanya Koshowski, the group’s executive director. Food bank use jumped 23 percent in Alberta in the year ended March 2015, the country’s biggest increase, according to Food Banks Canada.

Police are pointing to economic decline and rising drug use to explain Calgary’s crime surge. In the first 10 months of 2015, commercial break-ins almost doubled from a year earlier, bank robberies were up 65 percent and home invasions increased 52 percent, Calgary Police Service data show. –Zerohedge

In addition to what is happening to Canadians at a individual level, the province of Ontario has reached a tipping point of debt where they are now asking their citizens to voluntarily give the government money to help pay down $600 billion in obligations they can no longer even afford the interest payments on thanks to the crash in oil.

Ontario Premier Kathleen Wynne is asking that you consider giving your money to the Ontario government as well.

For a mere $21,000 for every man, woman and child in the province, Ontario could be debt free.

No, this is not some kind of holiday joke about the Grinch who stole Christmas.

And, no, voluntarily donating to the government isn’t in lieu of paying taxes.

It is in addition to them.

Canada’s largest province has asked its taxpayers to donate their hard-earned money to the cause of bailing out the much indebted provincial government.

On top of paying among the highest taxes in North America, and coping with skyrocketing hydro prices — hikes directly caused by the decisions made by this Liberal administration and the previous one — the Wynne government wants more.

Treasury Board Chair Deb Matthews made the bold request last week, and specifically asked folks to donate their tax return rebate to help pay off the provincial debt. – Toronto Sun

So the first of my three forecasts for 2016 will be this:  Canada will trigger a default event in the junk bond market that will escalate to U.S. banks, bringing in capital controls and the first depositor bail-in event in North America.

keep calm

keep calm

I'm turning Chinese, I think I'm turning Chinese I really think so...

The inclusion of the Chinese Renmimbi into the SDR basket of currencies was like the releasing of waters from an overly filled reservoir, and almost immediately initiated the expansion of Yuan internationalization to all points on the globe.  Not only have four major banking systems (London, Frankfurt, South Korea, and Russia) opened new Yuan bond hubs to facilitate the growth of the Yuan internationally, but two other events in Zimbabwe and the United Arab Emirates (UAE) almost assure China that 2016 will see their currency reach critical mass and become a global reserve by default.

The United Arab Emirates (UAE) has signed an agreement with China to set up a clearing hub for the Chinese currency Yuan or Renminbi (People’s money), local UAE mediar eported on Sunday.

The UAE clearing hub for the Chinese currency, which will satisfy growing needs amongUAE-based firms and banks alike, will be the second in the Middle East after the Gulf stateQatar set up the region’s first Renminbi clearing hub this April.

According to report, the UAE’s central bank said that the agreement was signed while AbuDhabi Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan was in China for an official visitearlier this month. – China Daily

With the UAE being the first OPEC nation to open a currency hub, the clock is now ticking for the rest of the cartel to open up the Yuan for use in oil sales next to the U.S. dollar.

The Chinese yuan may soon become a legal currency in Zimbabwe after Beijing confirmed it would cancel the African country’s $40 million debt.

“They [China] said they are cancelling our debts that are maturing this year and we are in the process of finalizing the debt instruments and calculating the debts,” said Patrick Chinamasa, Finance Minister of Zimbabwe.

He added that the country plans to increase local use of the yuan which was added to Zimbabwe’s basket of currencies last year. A multi-currency system has been in operation for the last six years, with the South African rand and US dollar in use since hyperinflation in 2009. At the peak of the crisis, the local currency became almost worthless, with 35 quadrillion Zimbabwean dollars equaling one US dollar.

The yuan hasn’t been approved yet for public transactions in the Zimbabwean market which is currently dominated by the US dollar.

Use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe,” said Chinamasa.

According to the finance minister, Chinese tourists could start paying for services in yuan and Zimbabwe could use the currency to pay its loans to China.

The minister added that the central banks of the two countries are already negotiating on a yuan clearance system. – Russia Today

And in Zimbabwe, this represents the first nation to allow the Yuan to be used in DOMESTIC transactions along with bi-lateral trade, and will quickly bring on the 'battle for Africa' as China solidifies its grip on African trade.

Thus the second forecast I am making for 2016 is that the Chinese Yuan will grow from its current 9-13% use in international transactions to a whopping 30% by the end of the year, and in this is will steal dollar trade partners from the U.S., who now function at 45% of global trade use per annum.

chna africa trade

chna africa trade

The Ottoman's lose again, 100 years later

I recently stumbled upon an interesting article in the Turkish Constitution that was placed there by the father of modern Turkey, Mustafa Ataturk.  Following the fall of the Ottoman Empire after WWI, the respected patriot of the people built a government that would not be ruled by a tyrant or dictator, and placed the responsibility of keeping the nation secular in the hands of the military.

From Turkey's founding, the military assumed responsibility for guaranteeing the republic's constitution. Article 35 of the Turkish Armed Service Internal Service Code of 1961 declared that the "duty of the armed forces is to protect and safeguard Turkish territory and the Turkish Republic as stipulated by the constitution."[2] Indeed, such an interpretation had its roots in the constitution. Turkey's first constitution was written in 1921, and since the formal proclamation of the republic, the country has had three additional constitutions—in 1924, 1961, and 1982. Until the constitutional amendments of 2001, each placed responsibility in the military's hands for the protection of the Turkish state from both external and internal challenges. The constitution of 1982, for example, prohibited contestation or constitutional review of the laws or decrees passed by the military when the republic was under its rule from 1980 until 1983. This effectively provided the military with a legal exit guarantee following their coup in 1980.[3]Specifically, article 15 stated, "No allegation of unconstitutionality can be made in respect of laws, law-amending ordinances and acts and decisions taken in accordance with the law numbered 2324 on the law on the constitutional order." - MEForum

And with Erdogan now evolving into a destructive force within Turkey, and through his actions of funding ISIS and causing Russia to impose massive sanctions that will cripple their economy, it is now very likely that the military will see the need once again to depose the Erdogan family and attempt to repair relations with Russia, which could include leaving NATO and joining the Eurasian sphere of influence.

And my last forecast for 2016 is that Erdogan will be deposed and ousted by a military coup, with Russia welcoming them back following the re-organization.

There are and will be many other ongoing events in the world that could shape the course of history here in 2016, and none so prevalent as what is going on in Europe with the refugee crisis.  But for now those events are not ones I have a strong feeling to speak upon, and will leave my big three forecasts to stand as they are, and see how they turn out 364 days from now.